Nestle says slavery reporting requirements could cost customers

One of the world's largest food and drink companies has warned proposed legislation requiring big business to report on their efforts to combat modern slavery could hit consumers' hip pockets.

Companies operating in Australia with an annual turnover of $100 million or more would be required to annually report on the risks of modern slavery within their business and the actions they've taken to address those risks under the federal government's draft Modern Slavery Bill 2018.

Nestle has warned customers could face additional costs if Australia requires companies to report on modern slavery risks.Credit:AFP

The reports would have to cover issues related to human trafficking, slavery, sexual servitude and child labour within businesses' operations and supply chains.

Nestle, owner of more than 2000 brands in 189 countries, has told a senate committee that Australia's proposed mandatory reporting requirements could add "cost and time" to businesses and suppliers "which will need to be borne somewhere".

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The company noted Australia's proposed reporting requirements would "go significantly beyond those of the UK Act", which only encourages businesses to report against similar criteria.

"While we are of the view that the mandatory requirements are sensible, in practical terms thisdifference means that multinational companies will have to prepare bespoke statements foreach country in which they are required to report," Nestle's submission said.

" ... Not all suppliers may bear those costs themselves; some may pass them on to customers/consumers."

Nestle in 2015 acknowledged serious issues with slavery in its supply chain after commissioning global non-profit Verite to investigate six production sites in Thailand. Verite found vulnerable workers from Cambodia and Mynamar had been lured to Thailand, often under false pretences, and forced to work in dangerous and violent conditions.

Nestle has also acknowledged issues with child labour in its cocoa supply chain and spoken strongly against the practice. On July 1 it implemented a new responsible sourcing standard with mandatory requirements of suppliers relating to pay rates, working hours and workers' ages.

Nestle's submission encouraged the Australian government to examine implementing financial penalties for companies that failed to file a statement.

" ... our view is that the absence of penalties will be counterproductive in the medium term, and that penalties for failure to report should be a focus of the three year review," it said.

Many submissions to the senate committeecalled on the mandatory reporting revenue threshold to be lowered. Anti-Slavery Australia, which recommended $25 million in its initial submission, has suggested an alternative $50 million as recommended by the Joint Standing Committee on Foreign Affairs, Defence and Trade and many advocacy groups. It also backed penalties for non-compliance with reporting requirements within 12 months of the legislation's passing.

The Australian Human Rights Commission agreed: "The lack of penalty provisions in the Bill weakens the ability of the proposed legislation to drive genuine compliance and commitment from the business sector.

"The inclusion of penalty provisions for non-compliance will ensure that businesses have an incentive to deliver high quality reports and implement best practice due diligence standards on a consistent basis."

The Australian Chamber of Commerce and Industry said the impact of the legislation would be "significant", estimating the reporting requirements would directly affect at least 3000 businesses and tens of thousands of smaller enterprises elsewhere in the chain.

The chamber supported "capacity for voluntary reporting", it said, and noted the $100 million reporting threshold was lower than it believed appropriate.

"Some reporting entities will struggle to complete the list," the chamber's submission said.

"The capacity to complete the list will depend on the complexity of operations, their nature, location, dependence on and the level of engagement with its supplier chains a reporting entity brings to addressing its modern slavery statement requirements when they are enacted."

The Legal and Constitutional Affairs Legislation Committee is scheduled to report on the bill by August 24.